Iron Condor – The Comfort Zone (7 or 8)
San Jose Options presents Iron Condors - The Comfort Zone
The Iron Condor is a very popular options strategy today. It's known for it's high probability, but everyone knows that the risk to reward on this trade is highly unfavorable.
One thing that is not pointed out is that although this trade appears to have a high probability, included in this is extreme risk and high stress.
When we look at the "Comfort Zone" and safety range, we see that this only covers about 35 to 40% of the probability range.
We also take a look at Butterfly Spreads and Calendars. All three of these popular income strategies share a similar "Comfort Zone."
Although the Traditional Iron Condor appears to be a high probability trade with low risk, we believe it's not the trade it appears to be. In today's fast-paced market, it's a very risky trade that exposes your portfolio to great risk.
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San Jose Options is the preferred options education course for risk averse investors. Our strategies focus on low risk, high probability trading that allow you to have an enjoyable lifestyle without the stress.
Stop doing condors. It doesn’t make sense anymore. Vols, aren’t dropping, there’s a lot of risk and so on. We didn’t do condors in March, April, and May. If you look at some other services, they lost 91% those 3 months doing condors. In our course, we weren’t even doing them. Again, because from my technical analysis experience, I just had a feeling the volatility was going to rise and we stopped doing that trade.
I told this guy, I said, “Your vega position is -40,000.” So I said, “For example, if volatility rises 10 points, you’re going to lose about $400,000.” And he had no idea. His response was, “What’s vega?” Can you imagine? Can you imagine somebody putting $2 million into a trade that doesn’t know what vega is, doesn’t know what theta is, doesn’t know what gamma is or delta. Just because he saw this trade from somewhere else, maybe somebody’s video on Youtube or maybe a different course, maybe a blog, maybe somebody on CBOE dot com (cboe.com) teaching this, or maybe on the form . It’s all over the internet but the thing is the risk is not explained. Nobody spends time pointing out the possible risk.
This is what we do in our course. We look at all these trades and we say, “What if?” That’s what we have to do. Let’s take this and let’s look at this. What if the vols go up 10 points? This trade is down $400,000. Like I explained to that person, what happens if the vols go up 25% like they did in 2 days? Look at this trade, it’s down a million dollars. You’re down 50%. We really have to redesign these trades. Not only do you have this 30% comfort zone, but if you’re doing any significant amount of contracts, your vega position gets extremely unbalanced. There’s people out there putting money into these based on who knows what.
Needless to say, this is a true story. I talked to the same person a few days ago. Again, he was saying, “I really need to get into the course and start to learn some more things about option, start to learn some of these lower risk strategies that you’re doing and teaching and so on.” Basically, this person is down 75%, May, June, July, in 3 months he took $2 million down to close to 500-600,000 by doing traditional option strategies that, again, who knows where he learned them but you can learn them all over the internet. That’s why I’m here to kind of help people think a different way about these things because I know what it’s like. I was there. I was there in the past too. I was being brainwashed that this was an 83% probability trade. I was taught the same thing that you guys are going through. That’s why I’m here to tell you now it’s not true because this trade includes so much more risk than this number reveals. We see the 83%, we don’t see the 40% probability over here or over here that this trade is taking on tremendous risk that we can’t sleep, that we can’t leave, that we can’t go shopping, we can’t go on vacation. You can’t live your life because your trade’s over here, because that’s included in the 83%. People don’t talk about that. people talk about this 10% up here, this little, tiny 10…